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November 15, 2011

Warren Buffett Buys 5.4 Percent Stake In IBM

by editor

Billionaire investor Warren Buffett said on Monday that his Berkshire Hathaway investment firm boosted its holdings of IBM to $10.7 billion, or about 5.4 percent of the company´s outstanding stock, during the third quarter.

Mr. Buffett made the disclosure during an appearance on the financial news channel CNBC on Monday, saying Berkshire had been buying stock in IBM since March and now owns 64 million shares.

Berkshire began buying shares of IBM after Mr. Buffett, 81, read the Armonk, New York-based company´s annual report, and saw the firm “through a different lens.”

Mr. Buffett, chairman and chief executive officer of Berkshire Hathaway, said he acquired most of his stake in IBM during the three months ending September 30.

Shares of IBM´s stock have risen 28 percent in 2011 -- the biggest gainer in the 30-company Dow Jones Industrial Average — and reached a record high on October 14.

Berkshire invested roughly $1 billion in the Atlanta-based soft-drink maker by the end of 1989, and made purchases of nearly $300 million in 1994.

IBM is currently trading at about 14 times earnings, versus Coca-Cola at about 18 times earnings, Bloomberg News reported.

Last month, IBM appointed Virginia “Ginni” Rometty as its first female CEO. The $220 billion, 100-year-old company is pursuing operating earnings of at least $20 a share by 2015, from a projection of $13.35 for this year.

Mr. Buffett highlighted IBM´s opportunities to expand abroad, along with its track record of executing its strategy.

“They are thinking about the shareholders,” he said during the CNBC interview.

“They treat their stock with reverence, which I find is unusual among big companies.”

IBM spent more than $100 billion on dividends and buybacks since 2003.

Buffett drew down Berkshire´s cash and invested $23.9 billion during the third quarter, including $6.9 billion of equities, $5 billion for preferred shares and warrants in Bank of America and the acquisition of Lubrizol Corp. for roughly $9 billion.

Separately, Mr. Buffett also disclosed on Monday after the markets closed that he had added 9.3 million shares of chipmaker Intel to his portfolio.

Mr. Buffett´s stock-picking abilities have made him one the wealthiest men in the world, with a fortune of $50 billion, according to Forbes magazine.